International Atomic Energy Agency inspectors are due to start three days of talks in Tehran, Sunday, “to resolve all outstanding substantive issues” over Iran’s nuclear work. They plan to hear Tehran’s response to questions raised in the most recent IAEA report on Iran’s nuclear work, which cited evidence of research activity — particularly before 2003 — that may have been focused on warhead design. But nobody’s expecting “all outstanding substantive issues” of the eight-year standoff to be resolved in three days: The aim of the IAEA delegation is to establish Tehran’s willingness to cooperate and provide access to all personnel and sites requested, and to develop a “roadmap” for resolving concerns over aspects of Iran’s program cited in the report. But the nuclear standoff is no mere misunderstanding.

That’s why the U.S. and its Western allies have approved the toughest round of sanctions to date, intended to choke the energy exports that are Iran’s economic lifeline. The purpose of the new measures, say U.S. officials, is to inflict sufficient economic pain on Iran to force its leaders to seek a diplomatic solution. New talks between Iran and the Western powers, China and Russia may be held in the coming weeks, possibly in Turkey. That’s not soon enough, apparently: “To avoid any military solution, which could have irreparable consequences, we have decided to go further down the path of sanctions,” explained French foreign minister Alain Juppé earlier this week, echoing a view commonly expressed by Western decision-makers that unless Iran is seen to be squeezed by “crippling” sanctions that impose a prohibitive cost on its nuclear activities, Israel will launch a unilateral military attack that could trigger a potentially catastrophic war. Israeli leaders, meanwhile, typically tap their watches and warn that time is running out.

Juppe’s comments underscore the effectiveness of Israel’s bad-cop threat in spurring Western leaders to escalate pressure on Iran. And that’s certainly how many Israelis see it: Yedioth Ahronot columnist Sever Plocker, for example, on Wednesday congratulated Israel’s leaders for their success in brandishing the threat of a unilateral military strike to scare reluctant governments into dramatically tightening sanctions. “It certainly looks as though the Israeli campaign launched during the previous fall, where rumors of an imminent Israeli strike on Iran were disseminated, secured its objectives,” wrote Plocker. “Western statesmen clung to this campaign and utilized it in order to impose on Iran the devastating sanctions that Prime Minister Benjamin Netanyahu demanded two years ago already.”

But the Israeli leadership isn’t resting on its laurels. Scarcely had the ink dried on the EU oil embargo when Israel’s Defense Minister Ehud Barak was demanding more sanctions, and Prime Minister Benjamin Netanyahu was insisting that “very strong and quick pressure on Iran is necessary,” adding that “Sanctions will have to be evaluated on the basis of results. As of today, Iran is continuing to produce nuclear weapons without hindrance.”

That’s not strictly accurate, of course: Israel’s own intelligence assessment concurs with that of the U.S. that Iran is not currently building nuclear weapons and that it hasn’t yet taken a decision to do so — for now, it is assembling a nuclear infrastructure whose dual-use capability would allow Tehran to build nuclear weapons on a relatively quick time frame once it chooses to do so. Israel’s campaign is focused on preventing Iran getting to the point where nuclear weapons are within reach. A new round of frenzied speculation began this week when the New York Timesreleased online Israeli journalist Ronen Bergman’s lengthy story from Sunday’s magazine, which concludes, based on interviews with top decision-makers, that Israel plans to bomb Iran before the end of this year. Not that we haven’t heard it all before: The Atlantic’s Jeffrey Goldberg wrote a similar piece 18 months ago predicting an Israeli attack in the Spring of 2011 — a piece that was, as Goldberg noted in a blog post questioning Bergman’s timeline, based on interviews with many of the same decision makers.

Reiterating the threat of military action is a well-established Israeli tactic: Netanyahu argues publicly that Iran will only concede if it faces a real and imminent danger of military action. “This threat is crucial for scaring the Iranians and for goading on the Americans and the Europeans [into putting more pressure on Tehran],” wrote Haaretz columnist Ari Shavit last summer, castigating Israel’s recently retired Mossad chief Meir Dagan for pooh-poohing the idea of an Israeli strike on Iran. “It is also crucial for spurring on the Chinese and the Russians. Israel must not behave like an insane country. Rather, it must create the fear that if it is pushed into a corner it will behave insanely.”

As my colleague Karl Vick reports, however, question-marks persist over whether Israel in fact possesses the military means to inflict significant damage to Iran’s nuclear facilities. “As formidable as the Israeli Air Force is, it simply lacks the capacity to mount the kind of sustained, weeks-long aerial bombardment required to knock down Iran’s nuclear program, with the requisite pauses for damage assessments followed by fresh waves of bombing,” he writes. “Without forward platforms like air craft carriers, Israel’s air armada must rely on mid-air refueling to reach targets more than 1,000 miles away, and anyone who reads Israel’s order of battle sees it simply doesn’t have but a half dozen or so.”

Still, there’s little doubt that Israel has the capacity to mount a raid, which, while it might leave much of Iran’s nuclear infrastructure intact, could nonetheless provoke Iranian retaliation that escalates into a confrontation that raises pressure for U.S. intervention. That’s no place the Obama Administration plans to be, anytime soon, and its efforts are focused on combining the latest round of sanctions with new outreach efforts aimed at giving Iran a diplomatic off-ramp from the standoff. The focus of the European Union-led talks that may be held in Turkey is on agreement on limited confidence-building steps that could change the dynamic of the conflict.

A number of possible scenarios remain under consideration, including fuel swaps to test the two sides’ willingness to find a compromise. But Israel is skeptical of compromising with Iran, which it accuses of simply playing for time while not changing its basic stance. Bergman writes in his New York Times piece that “the Israelis suspect that the Obama administration has abandoned any aggressive strategy that would ensure the prevention of a nuclear Iran and is merely playing a game of words to appease them. The Israelis find evidence of this in the shift in language used by the administration, from ‘threshold prevention’ — meaning American resolve to stop Iran from having a nuclear-energy program that could allow for the ability to create weapons — to ‘weapons prevention,’ which means the conditions can exist, but there is an American commitment to stop Iran from assembling an actual bomb.”

That’s a critical distinction, of course, because what Iran is currently pursuing is “breakout capacity”: a threshold where it has put the means to build weapons relatively quickly within reach, should it decide to break out of the Non Proliferation Treaty (NPT), expel the IAEA inspectors who continue to monitor all of its enrichment activity and certify its non-military nature, and dash to build a bomb. Iran currently enriches uranium to civilian levels permissible under the NPT, but the same technology would allow it to produce the high-enriched uranium needed for atomic bombs (which also require considerable precision engineering capacity and the ability to miniaturize a nuclear explosive to the dimensions that can be carried atop a missile). Threshold capacity is hardly unique: Japan, Brazil, Argentina and others are believed to have the means to quickly build nuclear weapons if they chose to.

While Iran’s move towards breakout capacity is viewed as a strategic challenge by its adversaries, Tehran’s actual transgressions of the NPT fall within the transparency requirements, having done much of its nuclear work in secret before 2003 — and possibly by doing weapons research in the course of that work. It is those concerns that led to the U.N. Security Council order to suspend enrichment, but once they’re resolved, Iran has the right under the NPT to enrich uranium. The Iranian domestic consensus insists that Iran be granted the same rights as any other NPT signatory, and there’s a growing view among Western officials, which is strongly opposed by France and Israel , that a viable diplomatic solution would see Iran maintaining its enrichment capacity, albeit under tougher inspection and other safeguards against weaponization.

The New York Timesreported Tuesday that “several American and European officials say privately that the most attainable outcome for the West could be for Iran to maintain the knowledge and technology necessary to build a nuclear weapon while stopping short of doing so.” To get there, these officials told the Times, Iran would have to establish trust by demonstrating full transparency and expanding the inspection regime. “Iran,” the report continued, “would have to become a country like Japan, which has the capability to become an atomic power virtually overnight, if need be, but has rejected taking the final steps to possessing nuclear weapons… (But) settling for an Iranian state that could quickly produce a nuclear weapon would be hard for the United States to embrace because of Israel’s deep antipathy toward Iran and Western and other nations’ fears of setting off a regional arms race.” Indeed. Israel’s stated bottom line has been that Iran can’t be allowed to enrich uranium on its own soil, and its position has considerable support on Capitol Hill even though the Obama Administration has moved towards stating that if Iran establishes certifiable international confidence in its intentions, it would have the right to enrich uranium under IAEA monitoring.

The key players remain so far from a comprehensive deal right now that questions over the shape of a final deal may seem abstract. But signaling intent could enable, or prevent, progress. The Israelis are openly skeptical of confidence-building measures as have emerged up to now, precisely because they don’t stop Iran’s continued enrichment activity. A diplomatic process — and even sanctions pressure — will take a long time to produce results. The Israelis repeatedly insist that time works to Iran’s advantage. It remains to be seen, however, what effect the threat of unilateral military action that has helped convince the Europeans to impose an oil embargo will have on shaping the West’s efforts to produce its preferred outcome of a diplomatic solution.